"Africa's Diaper King" faces the lifting of the ban exam: SOFTCARE (02698) with 15 cornerstone investors holding 45.31% of the shares for sale faces liquidity stress test.

Known as the "King of African Diapers," SOFTCARE (02698) is about to face a new challenge in the capital market. It is understood that SOFTCARE will face the unlocking of restricted shares from its IPO on May 10. The number of shares to be unlocked this time is approximately 41.2074 million shares, accounting for about 45.31% of the total global offering; more crucially, these shares are jointly held by 15 cornerstone investors with a relatively diversified shareholding. Historically, a large unlocking combined with a highly diversified shareholding structure often puts significant pressure on a company's stock price in terms of liquidity, and may even trigger a temporary liquidity crisis. The key to dealing with this situation lies in whether the company's fundamentals can be recognized by the market. If its future growth logic continues to gain the trust of investors, then even if the stock price is temporarily under pressure due to the unlocking, long-term funds may still take advantage of the situation to stabilize fluctuations and help the stock price gradually return to its intrinsic value. So, can SOFTCARE successfully navigate through this challenge? Luxurious Cornerstone Investors + Enthusiastic Subscription, Difficult to Change the Ongoing Wide Price Fluctuations SOFTCARE's IPO used "Mechanism B," with a total offering of 90.884 million shares, accounting for 15% of the total share capital of the company (before the exercise of the over-allotment option). Of this, the public offering consisted of 9.0884 million shares, accounting for 10% of the total offering, with the remaining 90% for international placement. During the subscription phase, SOFTCARE received strong investor interest, especially at the cornerstone level. According to the prospectus, SOFTCARE introduced 15 cornerstone investors, who collectively subscribed to 41.2074 million shares of SOFTCARE, accounting for approximately 50.38% of the shares allocated for international placement before the over-allotment option was exercised, and about 45.34% of the total offering. These 15 cornerstone investors include well-known domestic and foreign investment institutions. Among them, private equity firm Ant Capital, regulated by the Monetary Authority of Singapore, holds 0.97% of the shares, while Arc Avenue Asset Management, with a background in a Singaporean family office, holds 0.98%. International top investment banks Morgan Stanley (through its entity in Beijing), renowned venture capital firm Sequoia Capital (through its fund), and established private equity firm FountainVest Partners all hold 0.49% each. Additionally, domestic mutual funds, Fuguo Fund and E Fund, hold a combined 0.39%, and Huaxia Fund (Hong Kong) holds 0.24%. The cornerstone lineup also includes Boyu Capital, Southern Fund, NewTrails Capital, Hongzhang Capital, TruMed Investment, Qihui Runjin, and quant market maker Jane Street. SOFTCARE's lineup of cornerstone investors can be described as "luxurious," bringing together leading institutions from various sectors and establishing a solid foundation of credibility. This strong endorsement significantly aroused market enthusiasm: SOFTCARE's international placement received about 34.33 times oversubscription, while its public offering received a staggering 1813.77 times oversubscription, indicating a high level of demand from retail investors. Looking at the actual number of tradable shares, SOFTCARE's market capitalization is not very large after its listing. With cornerstone investors locking up approximately 45.34% of the total offering, the tradable shares within 6 months post-listing account for about 8.199% of the total share capital, representing approximately 49.683 million shares calculated at the offering price of HKD 26.2 per share. The market value of these shares is only HKD 1.301 billion. However, despite the combination of luxurious cornerstone investors and enthusiastic subscription sentiment, the actual market value of approximately HKD 1.3 billion did not show the expected strong momentum after the listing. On the first day of trading on the Hong Kong Stock Exchange on November 10, 2025, SOFTCARE's share price surged to HKD 36.8 within the first 10 minutes of trading, representing a 40.46% increase from the offering price. Subsequently, under profit-taking pressure, the stock price quickly fell by nearly ten percentage points. Although it stabilized in the afternoon, it fell again towards the close, ending the first day of trading with a gain of 25.95%. However, little did they expect that the high of HKD 36.8 on the first day of trading would be the peak for SOFTCARE's stock price for the next five months. Over this period, SOFTCARE's stock price entered a broad sideways fluctuation, dropping to HKD 25.7 on March 9, below the offering price, then rebounding. As of the close on April 16, SOFTCARE was trading at HKD 31.34 per share, representing a cumulative increase of approximately 19.62% since the offering. While some cornerstone investors are still in profit, the gains are limited. It is worth noting that with cornerstone investors being quite diversified, if some of them choose to take profits, it could significantly impact the stock price - trading activity has been light since the beginning of the year with an average daily turnover of only about HKD 32.44 million in April, suggesting thin liquidity that may struggle to absorb concentrated selling pressure after the unlocking. The key factor determining whether cornerstone investors will sell their shares after the unlocking lies in the company's ability to sustain future growth expectations. Strong fundamentals and a potential valuation decline will highlight the value of allocation Reviewing SOFTCARE's financial performance since 2022, it has demonstrated a steady growth trajectory. From 2022 to 2025, SOFTCARE's revenues were approximately $320 million, $411 million, $454 million, and $564 million, respectively, while the adjusted net profits for the same period were $29.266 million, $83.724 million, $98.355 million, and $122 million. Behind this consistent growth is SOFTCARE's position as a leading fast-moving consumer goods company in emerging markets, having established a competitive advantage through a strategy of "local production + global supply chain + deep distribution," maintaining strong competitiveness in the market. At the local production level, the company has adopted a rooted strategy in Ghana, Kenya, and 8 other African countries to operate 8 production bases with 51 production lines. By sourcing locally and producing on-site, SOFTCARE significantly reduces around 10% of tariff and logistics costs and gains crucial supply chain flexibility. The company can quickly adjust product specifications (such as size, absorbency) according to local market demands, shortening the production cycle from months of international shipping delays to on-demand local production. In the low-income African markets, this cost advantage translates directly into fierce price competition - with their single diaper sold for 6-20 cents, significantly lower than international brands. Through localized cost reduction and economies of scale, the company has established a business model of "low-margin, high-volume," gaining substantial market dominance in various regional markets. The global supply chain is a critical foundation supporting the efficient operation of localized production. By centralizing the global procurement of bulk raw materials (such as non-woven fabric, superabsorbent polymer), SOFTCARE leverages group-level purchasing power to achieve significant cost advantages that local small manufacturers cannot match, reinforcing the product's positioning as the best value for money. More importantly, the global supply chain layout avoids dependence on suppliers in a single region. In the face of supply interruptions or price fluctuations in specific regions, the company can quickly switch to other qualified suppliers to ensure the continuity and stability of production. In emerging markets with inadequate infrastructure and frequent external risks, this supply chain resilience holds strategic value. The last link to convert product strength into market share is the deep distribution network that SOFTCARE has established. The company has set up a channel system with over 2800 distributors and retail outlets in Africa, reaching deep into town markets and even villages. This capillary-level coverage is beyond the reach of international giants reliant on modern retail channels (such as Procter & Gamble, Kimberly-Clark), creating a significant barrier to entry for competitors in the short term. Through high-density, sustainable access to end-users, SOFTCARE has achieved convenience of "seeing and buying" in consumers' daily lives. This deep channel penetration not only serves as a critical step in completing sales conversions but also acts as the most effective means of cultivating user habits and building local brand loyalty. Constructed on the three dimensions of local production + global supply chain + deep distribution, SOFTCARE's competitive barriers allow for a reuse of capabilities in both product categories and market expansion in emerging markets. On the product side, the company has extended its business from infant care to female care and household care; on the market side, the company deeply penetrates West Africa while expanding into East Africa, Central Africa, and South America, accelerating regional expansion to validate the company's emerging market development experience and capability reuse logic. In the middle of 2025, SOFTCARE's channel deepening and regional expansion efforts yielded significant results. The company's revenues in East Africa/West Africa/Central Africa/Latin America were $256 million, $231 million, $58 million, and $22 million, with year-over-year growth rates of 23.9%, 18.4%, 34.5%, and 134.3%, respectively, with the Latin American market becoming a new growth point. Thanks to the rapid growth in revenues in various regions, SOFTCARE achieved high-quality growth across all product categories in 2025, with all products showing a steady upward trend in both quantity and price. For instance, sales volume/price of the infant care business grew by 17.90%/4.38% year-on-year, driving revenue growth of 23.07% to $446 million; female care business sales volume/price grew by 19.37%/7.12%, driving revenue growth of 27.87% to $99 million; and household care business sales volume/price grew by 52.75%/0.67%, leading to revenue growth of 53.78% to $22 million. It is foreseeable that based on the advantages of localization, global supply chain, and deep channel capabilities, SOFTCARE's continued expansion in emerging markets at both the product and market levels is expected to drive the company's sustained and robust growth. This is also supported by Zhongtai's research report. Zhongtai predicts that SOFTCARE's revenues from 2026 to 2028 will be $670 million, $780 million, and $910 million, with year-over-year increases of 18%, 17%, and 17%; while net profits attributable to shareholders will be $142 million, $166 million, and $196 million, with year-over-year increases of 17%, 17%, and 18%. Stable growth expectations will provide fundamental support for the company's stock price and help mitigate any potential concentrated selling pressure after the unlocking. However, investors should be aware that the company's current valuation is relatively reasonable, and further upward movement in the stock price will mainly depend on internal drivers from performance growth, making it challenging to achieve significant returns from valuation expansion. As of the close on April 16, SOFTCARE's market capitalization was HKD 19.5 billion, corresponding to a static PE valuation of about 20.41 times the net profit of $122 million in 2025. Even when calculating based on the estimated net profit of $142 million in 2026, the current market value corresponds to a dynamic PE valuation of 17.55 times, which is already in line with the company's net profit growth rate. This explains the continued wide fluctuations in SOFTCARE's stock price after listing, which is a market-driven valuation digestion process. However, if the valuation drops to around 12 times due to excessive selling pressure after the unlocking of restricted shares, the odds for SOFTCARE could improve.